In July 2014 we spent 2,5 weeks in Portugal. Zoe was turning two later that month, so, in order to save money, we made sure to fly back before her 2nd birthday. That way she still traveled as an infant and basically for free.
We don’t like mass tourism. Portugal’s beaches are far less crowded that most other European beaches in the south.
We spent the first few day in Lisbon, where we rented a small apartment on airbnb.com.
We can definitely recommend airbnb.com apartments for family travel in Europe. They are usually quite affordable, offer more space for kids to run around than hotel rooms, and you have a kitchen, which is easier in case you have little fussy eaters, and also cheaper than eating out three meals a day.
Lisbon was ok with kids but very hot that month. We took our time checking out the city, and took many little breaks at little cafes and juice bars.
From Lisbon we took a train all the way down south to Tavira on the Algarve coast. Trains in Portugal are modern, affordable, and reliable.
Tavira is a cute medium sized town on a small river. From the riverside you can take a boat to an island a few kilometers away, where you can find a campground, an amazing beach (big waves and surfers), and a few seafood restaurants + beach bars.
The waves at this beach were too big for our two and six year olds unfortunately, but they still had fun playing in the sand, running from waves, and cooling off with buckets.
In Tavira we got a great deal at the impressive and beautiful Convento Das Bernardas (https://www.tripadvisor.at/Hotel_Review-g285715-d7621640-Reviews-Convento_das_Bernardas_Residence-Tavira_Faro_District_Algarve.html), a former convent turned into an amazing plot of apartments with pools. They had just opened then, and it was very cheap and not fully booked. The apartment was big, spotless, tastefully furnished, with a perfectly euqipped kitchen, a washing machine, AC, basically anything you could ever need. The only downside were tons of mosquitoes as soon as the sun went down.
Our next destination was Carvoeiro, a village on the Algarve coast. We stayed at an airbnb apartment with garden and pool, and rented a small car to explore the various nearby beaches. In contrast to the Tavira area, the beaches here are much more impressive and the water is calmer, so also children can swim. Some beaches are not that easy to climb down to though. We recommend to rent a car and look around.
We also recommend an excursion to the Atlantic coast of Portugal. We enjoyed the lighthouse and beaches at the corner of Atlantic and Algarve coast.